The Dow Keeps Falling Because There Are Too Many Risks to Choose From
Illustration by Michael George Haddad
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The
Dow Jones Industrial Average
fell 800 points Wednesday, or 3.1%, to 25479.42. It closed at the low point of the day, as investors were grappling with multiple risks.
- The 2-year and 10-year government bond yields inverted, with the longer-duration bond yielding less than the shorter-duration issue. That is supposed to be a sign that investors expect slower growth in the future. And when it happens, stock market volatility usually follows, just like Wednesday.
- Chinese industrial production grew 4.8% in July, below the 6% economists predicted, the lowest growth rate recorded since the financial crisis. China is the second-largest economy in the world and accounts for more than its fair share of total global economic growth.
- Political unrest isn’t helping, either. Hong Kong protests and the crash of the Argentine peso are hurting investor sentiment. When things deteriorate quickly investors seek safety, because it’s tough to judge quickly whether any company has exposure to one unexpected event. The Argentine peso is down almost 25% week to date. That is unheard of for currency markets, which usually move a fraction of a percent a day.
- The Chinese Yuan is still above 7 to 1 U.S. dollar. A weaker Yuan was the catalyst for the Dow’s 767 plunge on Aug. 5.
Unfortunately, investors have many choices on which risk worries them most.
Write to Al Root at allen.root@dowjones.com
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